For both seasoned nonprofit professionals and newcomers to the world of charitable organizations, the term "audit" is likely familiar. However, what precisely constitutes an audit, and why is it significant? Let’s dive into the fascinating (yes, fascinating!) world of nonprofit audits and find out which states require them.
What is a Nonprofit Audit?
Think of an audit as a health check-up for your nonprofit organization. Just like you'd visit a doctor to ensure everything's running smoothly with your body, an audit ensures that your nonprofit’s financial health is in tip-top shape. It’s a comprehensive examination of your financial statements and processes by an independent auditor to verify that everything is accurate and complies with the law.
Why Do Nonprofits Need Audits?
1. Transparency and Trust: Donors, grantors, and the public want to know that their contributions are being used appropriately. An audit provides a seal of approval that your financial statements are accurate and trustworthy.
2. Compliance: Certain funders, including government agencies and private foundations, might require an audit as a condition of funding. Plus, some states mandate audits based on your nonprofit’s revenue or other criteria. See the state-by-state requirements below.
3. Internal Control: An audit can reveal weaknesses in your financial processes and offer recommendations for improvement, helping you avoid fraud and mismanagement.
Which States Require Nonprofit Audits? While not all states require audits for nonprofits, many do, and the requirements can vary widely. Here’s a handy guide to keep you in the loop:
Alabama: No audit requirement by the state for charitable organizations.
Alaska: An audit is required if contributions exceed $500,000. Reviews are required for contributions between $250,000 and $500,000.
Arizona: No audit requirement by the state for charitable organizations.
Arkansas: No audit requirement by the state for charitable organizations.
California: Nonprofits with gross revenue of $2 million or more must conduct an audit.
Colorado: Nonprofits with contributions over $750,000 must have an audit.
Connecticut: An audit is required if contributions exceed $500,000. Reviews are required for contributions between $200,000 and $500,000.
Delaware: No audit requirement by the state for charitable organizations.
Florida: An audit is required if annual contributions are $1 million or more. Reviews are needed for contributions between $500,000 and $1 million.
Georgia: Nonprofits with contributions exceeding $1 million must have an audit.
Hawaii: An audit is required for nonprofits with gross revenue exceeding $500,000.
Fun Fact: Did you know that for many nonprofits and private foundations, getting an audit isn't just about compliance? A financial statement audit can enhance your organization's credibility and transparency. This can lead to increased trust from donors and grant-making entities, which often translates to more funding opportunities. An audit is can be a strategic investment in your nonprofit's future growth and sustainability!
Idaho: No audit requirement by the state for charitable organizations.
Illinois: Nonprofits with annual revenues over $300,000 must have an audit.
Indiana: No audit requirement by the state for charitable organizations.
Iowa: No audit requirement by the state for charitable organizations.
Kansas: Nonprofits with contributions exceeding $500,000 must have an audit.
Kentucky: Nonprofits with contributions over $500,000 must have an audit.
Louisiana: No audit requirement by the state for charitable organizations.
Maine: An audit is required if contributions exceed $500,000.
Maryland: Nonprofits with contributions over $750,000 must have an audit. Reviews are required for contributions between $300,000 and $750,000.
Massachusetts: If your nonprofit has gross support and revenue over $200,000, an audit is mandatory. If between $100,000 and $200,000, a review is needed.
Michigan: Nonprofits with contributions exceeding $500,000 must have an audit.
Minnesota: Nonprofits with contributions over $750,000 must have an audit. Reviews are required for contributions between $250,000 and $750,000.
Mississippi: No audit requirement by the state for charitable organizations.
Missouri: No audit requirement by the state for charitable organizations.
Montana: No audit requirement by the state for charitable organizations.
Nebraska: No audit requirement by the state for charitable organizations.
Nevada: Nonprofits with contributions exceeding $500,000 must have an audit.
New Hampshire: Nonprofits with contributions over $1 million must have an audit. Reviews are required for contributions between $500,000 and $1 million.
New Jersey: Nonprofits with contributions exceeding $500,000 must have an audit.
New Mexico: No audit requirement by the state for charitable organizations.
New York: An audit is required for organizations with annual revenues exceeding $1 million. If revenues are between $250,000 and $1 million, a review is required instead.
North Carolina: An audit is mandatory for nonprofits receiving $1 million or more in contributions. Reviews are needed for contributions between $500,000 and $1 million.
North Dakota: No audit requirement by the state for charitable organizations.
Ohio: No audit requirement by the state for charitable organizations.
Oklahoma: No audit requirement by the state for charitable organizations.
Oregon: No audit requirement by the state for charitable organizations.
Pennsylvania: Nonprofits with contributions over $750,000 need an audit. For contributions between $250,000 and $750,000, a review is required.
Rhode Island: Nonprofits with contributions exceeding $500,000 must have an audit.
South Carolina: Nonprofits with contributions over $500,000 must have an audit.
South Dakota: No audit requirement by the state for charitable organizations.
Tennessee: Nonprofits with contributions exceeding $500,000 must have an audit.
Texas: No audit requirement by the state for charitable organizations.
Utah: Nonprofits with contributions exceeding $500,000 must have an audit.
Vermont: No audit requirement by the state for charitable organizations.
Virginia: An audit is required for nonprofits with contributions over $1 million. Reviews are needed for contributions between $750,000 and $1 million.
Washington: Nonprofits with contributions over $3 million must have an audit.
West Virginia: Nonprofits with contributions over $500,000 must have an audit.
Wisconsin: Nonprofits with contributions exceeding $500,000 must have an audit. Reviews are needed for contributions between $300,000 and $500,000.
Wyoming: No audit requirement by the state for charitable organizations.
Source: National Council of Nonprofits
Do All Nonprofits Need an Audit?
Short answer, no. If your nonprofit is small or has minimal revenue, an audit might not be necessary or required. However, even if not mandated, some organizations opt for audits to boost credibility and improve internal controls. If an audit seems too much, consider a financial review or compilation as a lighter alternative.
Audits might not be the most glamorous part of running a nonprofit, but they are essential for maintaining trust, ensuring compliance, and improving financial health. By understanding your state's requirements and staying on top of your financial records, you can keep your nonprofit on the path to success.
The BryMar team specializes in nonprofit audits. Our team can help you navigate the audit process with ease, ensuring your organization stays compliant and gains the trust of your donors. Reach out to the BryMar team today for a seamless audit experience!